Forten Company, a merchandiser, recently completed its calendar-year 2013 operat
ID: 2469573 • Letter: F
Question
Forten Company, a merchandiser, recently completed its calendar-year 2013 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s balance sheets and income statement follow.
The loss on the cash sale of equipment was $5,125 (details in b).
Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash.
Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term note payable for the balance.
Borrowed $4,000 cash by signing a short-term note payable.
Paid $50,125 cash to reduce the long-term notes payable.
Issued 2,500 shares of common stock for $20 cash per share.
Prepare a complete statement of cash flows; report its operating activities according to the direct method. (Amounts to be deducted should be indicated with a minus sign.)
Forten Company, a merchandiser, recently completed its calendar-year 2013 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s balance sheets and income statement follow.
Explanation / Answer
Answer :
Cash Flow Statement for Forten Company Particulars For the year ended 2013 Cash Flow From Operating Activities Cash Received from Debtors 567315 Less: Cash Paid to Creditors 370390 Cash paid for other expenses 131775 Taxes Paid 24250 Cash InFlow from Operating Activities 40900 Cash Flow from Investing Activities Cash received From Sale of equipment 11625 Less: Purchase of Equipment 96375 Net Cash OutFlow From Investing Activity (84,750) Cash Flowfrom Financing Activities Receipt from Short term notes payable 4000 Receipt from long term note payable 66375 Receipts from issue of equity shares 12500 Receipts from premium on equity shares 37500 Less: Payment for Long term Notes 50125 Dividend Paid 50100 Net Cash inflow from financing activity 20150 Net Cash Flow from All the activities (23,700) Opening Cash Balance 73500 Closing Cash Balance 49,800 Working Notes Calculation of Cash Received From Debtors Opening Acount Receivable + Sales - Closing Accounts Receivable = 50625+582500-65810 567315 Calculation OF Purchases Closing Inventory + Cost of goods sold - opening inventiry 275656+285000-251800 308856 Calculation of Cash Paid to Creditors Opening Accounts payable + Purchases - Closing Accounts Payable 114675+308856-53141 370390 Cash Paid for other expenses Closing Prepaid Expenses + Other Expenses for the year - Opening Prepaid 1250+132400-1875 131775 Receipts from Long term notes payable Closing notes payable + Notes payable repaid - opening notes payable 65000+50125-48750 66375